WPP targeted by short-selling American hedge fund

An American hedge fund has mounted a bet against WPP, the world’s largest advertising group, with a trade worth almost £90m.

Lone Pine Capital has built a short position worth 0.51 per cent of the FTSE 100 company, according to the most recent records. It is the first fund to make a major bet against WPP since early 2015.

The motivations for the trade are unclear. Short positions can be used to protect against losses elsewhere in a fund’s portfolio, or as a bet on the particular company’s fortunes fading. These positions are built by borrowing stock to sell to a third party, hoping it can be bought back later at a lower price to complete the trade.

WPP’s stock has fallen by almost a quarter so far this year as advertisers around the world cut back on consumer campaigns, sending the company's net like-for-like sales down 1.7 per cent in its most recent quarterly figures. The firm has warned that this year will be the worst for the advertising industry in a decade.

Sir Martin Sorrell, the company’s chief executive, has been reshaping parts of the business to simplify its structure as Facebook and Google’s online dominance threatens the traditional advertising agency model.

Lone Pine's short position first appeared on the Financial Conduct Authority register on 19 September. The FCA has tracked all shorts that are worth more than 0.5 per cent of a public company’s market value since the rules were tightened up in 2012.

The hedge fund, founded by Tiger Management alumnus Stephen Mandel two decades ago, also holds a three-year-old short position in Marks & Spencer, as well as bets against fellow high street giant Next and the publishing group Pearson. Lone Pine has previously made trades against numerous blue-chip firms including Associated British Foods, Burberry and several supermarkets.